Magazine article American Banker

MasterCard IPO Still in Court, Six Months after Fact

Magazine article American Banker

MasterCard IPO Still in Court, Six Months after Fact

Article excerpt

Eight months after going public, MasterCard Inc. is still fighting a legal challenge to its initial public offering.

The stock has nearly tripled in price since its debut, and MasterCard's chief rival, Visa U.S.A. Inc., has announced plans to go public, too. Yet MasterCard's lawyers appeared in a federal courthouse in Brooklyn on Friday, arguing for the dismissal of a complaint filed right before the IPO seeking to block it.

The supplementary complaint was attached to the consolidated merchant antitrust suit against Visa, MasterCard, and their member banks in the U.S. District Court for the Eastern District of New York. The merchants' lawyers could have sought an injunction against the IPO before it took place, but they chose not to, and it is unclear how MasterCard's IPO could be reversed. The antitrust suit seeks damages for past fees banks charged merchants.

When MasterCard went public, it gave up the right to impose litigation-related assessments on its former owners. The supplemental complaint charges that MasterCard's transition from a consortium of banks into a public company amounts to an acquisition that hurts competition as defined in section 7 of the Clayton Act.

The defense said the supplemental complaint lacks merit, because MasterCard's transition to a public company was a simple change in ownership and governance and did not harm competition or concentrate too much market power in the company.

Banks, which were the sole owners of MasterCard from its founding 40 years ago until the IPO, still own 41% of the company. MasterCard bought the rest of the shares; the public now owns 49%, and a charity owns 10%.

Kenneth A. Gallo of the Washington law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, who represents MasterCard, disputed the plaintiffs' contention that MasterCard's purchase of its equity from banks constituted an acquisition that created a new company and stifled competition. …

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